The US dollar traded higher against all of the major currencies on Friday including the Canadian dollar but even with today's rise, it is too early to declare a bottom in USD/CAD. Canada's retail sales report the most market moving piece of data today and while it printed much worse than expected, the boost that it provided for the pair was short lived.   The pair surged above 1.31 but the rally fizzled almost quickly as it happened. The selling pressure is strong for one reason alone, which is that the US dollar is weak. Economists had predicted a 0.3% rise in retail sales and the -0.1% decline caught everyone by surprise. It the first drop in 4 months and a big miss that was driven by weaker demand for food and alcohol. Consumer prices also dropped -0.2%, the first decline this year. The year over year rate was pushed down to 2% from 2.4%. Lower inflation is one of the central bank's main concerns and when combined with the pullback in spending, we can understand why the Bank of Canada turned dovish this month. With oil prices falling 6 out of the last 7 trading days, we continue to believe that I will only be a matter of time before USD/CAD bottoms. Meanwhile, the best opportunities for selling the Canadian dollar will be the crosses. USD/CAD has been consolidating in a tight range for the past month while AUD/CAD and NZD/CAD have enjoyed nearly one way gains. In the near term, we are particularly bearish CAD/JPY and EUR/CAD. As for USD/CAD, a bottom is near but we need to see a close above 1.31 for a bottom to be declared.

 

Meanwhile yesterday the US dollar plunged after Fed President Williams talked about taking a preemptive move with interest rates but this morning the greenback is trading higher across the board as the central bank tries to correct the confusion between magnitude and timing. Yes, there's no doubt that the Fed wants to ease and is likely to do so later this month but as Fed President Bullard noted in an interview with Dow Jones earlier this month, a 25bp cut would be appropriate. The dollar is up the most versus the euro and Yen. Weaker than expected German PPI pushed EUR/USD lower - the ECB meets next week and they are expected to set the stage for easing. Sterling is the most resilient but the losses in the New Zealand dollar was moderated by stronger than expected credit card spending.

Past performance is not indicative of future results. Trading forex carries a high level of risk, and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to trade any such leveraged products you should carefully consider your investment objectives, level of experience, and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with trading on margin, and seek advice from an independent financial advisor if you have any doubts.

Analysis feed

Latest Forex Analysis

Editors’ Picks

EUR/USD drops below 1.11 amid upbeat US data, trade concerns

EUR/USD is trading below 1.11 after robust US housing figures and solid consumer sentiment figures were published. Earlier, the common currency suffered from the concerns of new US tariffs on the EU.

EUR/USD News

GBP/USD down 100 pips after UK retail sales badly disappoint, amid USD strength

GBP/USD has plunged below 1.3050 after UK retail sales badly disappointed with a fall of 0.6% in December, on top of downward revisions. Odds of a BOE cut have risen.

GBP/USD News

Crypto market hyperspace mode On

The secondary actors of the crypto-sphere awaken and rally hard. Leading coins battle with greater resistance at the gates of a full bullish market. The only risk is an over-shoot, but that sentiment remains neutral.

Read more

Gold: Sustained move beyond 200-hour SMA sets the stage for further gains

Gold edged higher through the mid-European session on Friday and is currently placed near the top end of its weekly trading range, around the $1560 region.

Gold News

USD/JPY: Losing bullish momentum but retaining gains

Chinese encouraging data kept markets in risk-on mode at the beginning of the day. The US January Michigan Consumer Sentiment Index is seen at 99.3, matching December figure. USD/JPY holding at the upper end of its weekly range could correct lower.

USD/JPY News

Forex Majors

Cryptocurrencies

Signatures